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Saturday, 3 August 2013

What price Engineering in a nation of shopkeepers?

In 1644 John Milton, made out a case in his Areopagitica for freedom of speech. In passing, he observed great energy and potential in the English people:

Lords and Commons of England, consider what nation it is whereof ye are, and whereof ye are the governors: a nation not slow and dull, but of a quick, ingenious, and piercing spirit, acute to invent, subtle and sinewy to discourse, not beneath the reach of any point the highest that human capacity can soar to.

Almost two hundred years later, as British engineering swept the world, Robert Stephenson's London and Birmingham Railway Company established its engineering works halfway between the two cities at Wolverton in Buckinghamshire. In its day the works serviced and even built locomotives, some of which ended up in Australia, but its main task was the design and building of railway carriages, for which it was, in its day, the largest works in the world.Even after Dr Beeching's cuts, something of the former glory remains, operated by a company called Railcare which boasts on its website

The word "solution," outside a chemical context, usually means Corporate Bullshit Bingo. Even with an order book rumoured to be full from October, the enterprise is now on the financial rocks, and on 31 July the accountants moved in.

Next comes the butcher's bill, beginning with some 100 engineering jobs. It may be that productive activity can be saved in Wolverton, or it may be that Tesco's, having already taken over half the site, will end up with the rest. Who can tell?

Four questions arise:

How much of an economy should manufacturing represent?Somewhere in every advanced nation someone has to be making things in the real world. The almost complete destruction of British manufacturing industry in the past thirty years has been driven by the idea that wealth creation is fundamentally about manipulating money in ingenious ways, rather than producing tangible goods and services. Surely we can’t run the whole economy on smoke and mirrors.

What is the value of skilled labour?When engineering jobs go, the the country loses far more than simply manufacturing capacity. It degrades a whole economy to replace high value jobs with low paid low skill jobs, especially if these are temporary.

Lions led by donkeys?When business is all about financial ingenuity not engineering capability, be very afraid.The god that has usually failed in the past fifty years is not engineering, but management.

What’s the difference between spending and investment?In an economy that seems to be constructed around debt, much of it lodged in a mortgage bubble that will burst the moment interest rates climb anywhere near their historic levels, it seems incredible that money cannot be found to invest in productive long term industry.

Milton’s vision gives way to a nightmare where a tiny number of well-heeled financial manipulators with associated drones and loan sharks bob around in a sea of temporary schemes, paupers (in or out of work) and former skilled workers, all up to their eyeballs in debt. What sort of a future is that supposed to offer?

Here in the US, we are well on our way to "a nightmare where a tiny number of well-heeled financial manipulators with associated drones and loan sharks bob around in a sea of temporary schemes, paupers (in or out of work) and former skilled workers, all up to their eyeballs in debt." I'm sad to see England heading in the same direction.

You'd think the politicians would have learned something about investing during years of the present great recession, but apparently, you would be wrong.

Sadly Alan you are wrong about manufacturing. It's true that manufacturing as a percentage of GDP has fallen by a lot (I think by about half) over the most recent decades.

The reasons are twofold. Firstly there has been an astonishing improvement in productivity over that time. So, you just need fewer workers to produce the same amount of stuff. Secondly, through globalisation we are finally allowing the poorest countries to earn their way out of poverty by making things and selling them to us. Both of these are, in themselves, good and we should not seek to stop them. This trend towards globalisation has seen hundreds of millions of people rescued from dire poverty.

But it does leave us with a society in which inequality rises as semi-skilled British labour cannot compete with similarly skilled workers in poorer countries. Economists refer to this as the 'hollowing out' of the job market in which mid-level jobs are disappearing and the increase in high paying jobs just isn't enough to compensate.

As Christians living in a wealthy country our challenge is to speak uncomfortable truths. Global income levels are balancing out. The poor in poor countries are getting richer and the poor in rich countries are getting poorer. On balance, this is brilliant news and should have happened years ago.

Then we have to ask, and answer, the tough questions about what this means for us in the Uk.

This is hard. Really, really hard. I don't believe we can do it on our own. But then we don't. As my vicar sometimes says. Don't tell God how big your problems are, tell hot problems how big your God is.

Bill,if your analysis is correct, and it is certainly compelling, then what do we do with all our young people who in the past would have worked in semi skilled jobs and who now are increasingly unemployed and unemployable?

Bill is right. From the EngineeringUK 2013 report: "Turnover of UK engineering enterprises remains substantial, at £1.06 trillion in the year ending March 2011: that’s 23.9% of the turnover of all UK enterprises and over three times the size of the retail sector. The sector employs 5.4 million people across 542,440 engineering companies. Between 2010 and 2020 these companies are projected to have 2.74 million job openings. UK manufacturing is very much alive and well: ranking ninth in global output, it makes up almost half (46%) of UK exports, employs 2.5 million people, and accounts for 72% of UK business R&D. Far from a manufacturing decline, output has risen by 148% from 1948 to 2011 and is more valuable to the UK than ever."

Thank you, Bill and MH for taking this coversation in a very interesting direction, and Erika for a vital question that brings this from the realm of theoretical economics to real people's lives.

Whilst understanding the narrow argument Bill is making, I find it hard to accept some of the bigger assumptions behind it.

(1) Is there, in fact a limited amount of stuff to be produced, to be allocated between rich and poor nations? I would rather a world in which there was much mutual trading than one in which the dignity of manufacturing is degraded and pushed out in its entirety to the poorest nations. Furthermore productivity is almost impossible to measure sensibly. Take the town I was in yesterday, High Wycombe, where fifty years ago significant amounts of high quality furniture were manufactured and today almost none. In what sense is it more productive? An elderly doctor in the congregation told me of the pride of one of his patients in getting an apprenticeship with Ercol in the 1960's. Would the lad and his mother feel a similar pride about being on a scheme now? If not, why not? Is the chipboard at IKEA a suitable substitute for the stuff that Ercol used t make? It uses resources on a profligate scale for stuff that lats 5 years if you're lucky, but there's lots of it, some of it produced under highly questionable conditions in third world countries. Is that better? Wouldn't it be better for the third world countries to develop their own home and overseas markets, not depend on doing sweated labour for the West?

Alan,to what extent can we blame IKEA for cheap and cheerful manufacturing when they serve a society in which we have fashionable colours for kitchen units that change at least every two years if not annually?

Production conditions are a separate topic, not immediately linked to the quality of what we produce.Yes, they must be tackled! But without first producing for overseas companies who have the capital to invest in those countries, how would they end up with the kind of trained labour force they will need to develop their own markets?

I think the problem may be the disconnection between the pragmatics of what is produced and the commercial context in which engineering is organised. In the eighties a commercial house bought an undertaking like, say Sigmund Pulsometer Pumps in Reading, one of the world's finest engineering firms, and discovered there was far more money to be made by flogging off the factory and turning it into housing and a supermarket. GDP per square metre of site could well have been increased. I am fascinated by the very sunny review of the position in MH's source. Does it, I wonder, include civil engineering? Lurking in the background for me is the question of genuine polytechnic education which, again, does not seem to be in rude health, but I'd love to think it was. And finally, I see in your question one about built-in obsolescence, and the lifecycles of products which may be suboptimal.

Built in obsolescence is another one of those double edged swords.Yes, it encourages waste and should be discouraged.

On the other hand, it also encourages innovation and ensures that we all use reasonably energy efficient white goods with more modern technology - that might otherwise be developed and rot on the shelves or not be developed at all because there is insufficient demand for it.

I agree. That's why optimal is not maximum lifespan in a product. My learned friend (and professor of engineering) Brian Griffiths was telling me the other year about a conference he attended on built-in obsolescence. It's a fascinating subject; which also causes me to question Bill's implication that there is a known fixed amount of manufacturing that should go on in the world, and it's best to redistrbute it overseas even if (and this is what stuck in the craw) it involves making the poor poorer. Sir James Dyson wouldn't agree there, and has trenchant comments to make about UK manufacturing from the time eh relocated to, I think Singapore. I am impressed by MH's figures, but wonder how any of these relate to the German Mittelstand kind of model, which seems a good way to go?

I don't think Bill implied that there is a fixed amount of manufacturing which should go on in the world. He just said that you need fewer workers to produce the same amount of stuff. This has been the main driver behind the reduction of the proportion of the workforce in manufacturing, not "the idea that wealth creation is fundamentally about manipulating money in ingenious ways". The increase in productivity is so great that even when more stuff is produced globally (and it is, and will continue to be) a smaller percentage of people are engaged in its production.

I don't see why this is a bad thing. This in itself does not degrade the dignity of manufacturing, but the opposite. For every Ercol craftsman (who probably couldn't afford Ercol)there were once a hundred or more manufacturing workers in traditional industries employed in dehumanisingly repetitive work which is now done by robots.

Greater productivity increases wealth and therefore promotes the growth of other sectors.

The overseas sweatshops are of course an issue, but one of employment standards.

You ask about the figures I quoted in relation to the German Mittelstand model. Part of the answer is given in this comment in relation to SME, in the same report:"The UK is currently acknowledged as a world leader in several sectors: universities, automotive, renewable energy, space, low carbon, aerospace, creative industries, utilities, agri-food and bioscience. And we have a powerful SME sector which employs 42% of the UK workforce, represents 99.9% of all enterprises and makes a significant contribution to the economy at £1.5 trillion turnover."

The report (http://www.engineeringuk.com/_resources/documents/EUK_Executive_Summary_2013_Web.pdf) is least sunny in regard to education. It calls for a substantial growth in engineering undergraduates, GCSE/A level physics etc. Schools and parents need to get away from measuring success by the narrow indicator of numbers entering medicine.

I haven't got the time to research the respective manufacturing output data and which proportion is manufactured abroad and under what conditions.

But this article was interesting http://www.telegraph.co.uk/finance/yourbusiness/10047593/Manufacturing-isnt-dead-...-were-better-than-the-Germans-says-Pailton-Engineerings-John-Nollett.html

The German Mittelstandsmodell works on the bedrock of the German apprenticeship system that gives school leavers a solid vocational education and practical experience, while including virtually every major large and medium sized company and even a large number of small independents like bakers, butchers, hair dressers, garages etc.

It's the respect for a solid vocational education and the resulting professions that sets Germany apart, not necessarily its current manufacturing base.

Many thanks, Mark & Erika. I'm especially grateful for the link. I certainly don't want everyone doing low productive work in Dickensian factories. The interesting facto about Chinas is the way it is growing a new m middle class who have higher aspirations than simply producing kit for the West. It will be interesting to see how that impacts globalisation. I would be more sunny about productivity where we are still producing stuff more efficiently. I am not sure this is what is happening, and I am still unpersuaded that making the poor poorer in the UK is some kind of virtue. The key, I'm sure is education, and bearing in mind Erika's comments on the German mittelstand and the comments in UK engineering report, I cannot see hard evidence that we are moving towards a place where students and their parents will prize a future in manufacturing and engineering as much as one in media, law, financial services or medicine; nor one where a bright graduate will make as much money in manufacturing as in financial services.

Child of God by adoption and grace, husband of Lucy, father of five, jumped-up vicar (Area Bishop of Buckingham).
Born Edinburgh. Deacon 1979, Priest 1980, Bishop 2003. Cambridge MA, Oxford DPhil — ‘I am a doctor, but not the kind that helps people.’ I trained for ordained ministry at Wycliffe Hall. I have worked in various C of E contexts, urban and suburban, as well as in prison.